LFB Longview Fibre

Longview Fibre Company's (NYSE:LFB) consolidated net sales for the fourth quarter of 2006 increased 10.6 percent to $238.5 million, compared with net sales of $215.7 million in the fourth quarter of 2005(1). Net sales declined 2.9 percent sequentially compared with $245.6 million in the third quarter of 2006, as seasonal declines in manufacturing segment sales were partially offset by increased timber segment sales. Full year consolidated net sales for 2006 totaled $950.2 million, up 6.1 percent from net sales of $895.8 million in 2005, a result of single-digit percentage increases in both of the company�s operating segments. Fourth quarter 2006 consolidated operating profit totaled $6.2 million, compared with an operating loss of $11.1 million in the fourth quarter of 2005 which included the effect of a non-cash pre-tax charge of $9.7 million related to the permanent shut down and write-off of two paper machines. Fourth quarter operating profit improved sequentially, compared with $4.6 million in the third quarter of 2006 that included a $10.8 million non-cash pre-tax charge to reduce the carrying value of a sawmill to net realizable value. Consolidated 2006 operating profit declined to $32.1 million from $43.3 million in 2005, primarily reflecting increased advisory fees and REIT-related expenses. Consolidated net income for the fourth quarter of 2006 totaled $3.1 million, or $0.05 per share, compared with a net loss of $16.0 million, or $(0.24) per share, in the fourth quarter of 2005, and net income of $21.4 million for the third quarter of 2006. Fourth quarter 2005 net loss included a non-cash charge of $6.1 million, or $(0.09) per share, on an after-tax basis, related to the permanent shut down and write-off of two paper machines. Third quarter 2006 net income included the recognition of $20.0 million in tax benefits associated with the company�s REIT conversion. Consolidated net income for the full year totaled $19.0 million in 2006, compared with 2005 net income of $1.3 million. The increase in net income was primarily driven by the tax benefits associated with the company�s REIT conversion, partially offset by increased advisory and REIT-related costs and expenses related to the early redemption of Senior Subordinated Notes. Richard H. Wollenberg, President, Chief Executive Officer and Chairman of the Board, said, �2006 was a year of great accomplishment for Longview Fibre and one in which we delivered substantial value to shareholders. During the year we completed our conversion to a REIT, made a special distribution of $385 million, including cash of $77 million, and paid $43.2 million of regular dividends. We also restructured our debt, resulting in a lower aggregate interest rate. Finally, we implemented a new operating plan including an increased timber harvest, a more proactive sale program for higher and better use lands, and a process to explore the divestiture of non-core operations. We also made important tactical adjustments to our manufacturing operations to partially mitigate higher raw materials and energy costs.� Selected Segment and Consolidated Operating Results Timber Fourth quarter 2006 timber segment net sales totaled $51.2 million, a 25.4 percent increase from the fourth quarter of 2005 and up 18.0 percent sequentially from the third quarter of 2006. Log sales volume of approximately 82 million board feet was 41.8 percent higher than the fourth quarter of 2005 and up 29.7 percent sequentially from the third quarter of 2006. Average log prices during the fourth quarter of 2006 were down 7.7 percent compared to the year-ago period and down 6.5 percent sequentially. Fourth quarter timber segment operating profit was $26.8 million, up 47.4 percent from the year-ago period and up fourfold compared with segment operating profit of $6.2 million in the third quarter of 2006, which included the effect of a non-cash $10.8 million asset impairment charge taken to reflect the net realizable value of the company�s sawmill operation. Timber segment sales in 2006 totaled $193.0 million, up 2.9 percent compared with sales of $187.6 million for 2005, primarily reflecting higher log prices throughout most of the year. Timber segment operating profit was $78.6 million in 2006, including the effect of the non-cash $10.8 million asset impairment charge, compared with segment operating profit of $86.5 million in 2005. Manufacturing Fourth quarter manufacturing net sales of $187.2 million represented a 7.1 percent increase compared with net sales of $174.8 million in the fourth quarter of 2005 and a 7.4 percent sequential decline from the third quarter of 2006. Fourth quarter paper and paperboard sales were comparable to the year-ago period and down 14.6 percent sequentially reflecting seasonal weakness and the curtailment of certain low-margin products; converted products sales were up 10.8 percent from the fourth quarter of 2005 and were 3.3 percent lower than the third quarter of 2006. Fourth quarter manufacturing segment operating losses were $20.6 million compared with an operating loss of $29.2 million in last year�s comparable period which included the effect of a $9.7 million pre-tax, non-cash charge related to the permanent shut down and write-off of two paper machines. On a sequential basis, lower seasonal sales, combined with significantly higher wood chip prices and energy costs, resulted in a substantial increase in fourth quarter segment operating losses compared with the $1.6 million segment operating loss reported in the third quarter of 2006. Manufacturing segment sales in 2006 totaled $757.6 million, an increase of 7.0 percent compared with sales of $708.3 million in 2005. Manufacturing segment operating loss in 2006 totaled $46.5 million, including $12.1 million of allocated advisory and REIT-related costs, compared with a segment operating loss of $43.2 million in 2005, including the effect of the $9.7 million non-cash charge referred to above. Selling, Administrative & General Fourth quarter 2006 selling, administrative and general expenses and advisory fees and REIT related expenses totaled $24.1 million, or 10.1 percent of total net sales, compared with $27.6 million, or 12.8 percent of total net sales, in last year�s comparable period and $23.6 million, or 9.6 percent of net sales, in the third quarter of 2006. Selling, administrative and general expenses and advisory fees and REIT related expenses in 2006 totaled $110.3 million, or 11.6 percent of net sales, compared with $97.0 million, or 10.8 percent of net sales, in 2005. Balance Sheet and Cash From Operations The company continues to have a strong balance sheet, with $519 million of debt at year-end and significant remaining borrowing capacity. The company generated $9.0 million and $65.9 million in cash from operations during the fourth quarter and full year 2006, respectively. Cash from operations in 2006 declined $28.4 million from 2005�s results due primarily to changes in inventory and deferred taxes. In the fourth quarter, the company declared a regular quarterly dividend of $0.23 per share for shareholders of record on December 15, 2006, payable January 3, 2007. Declaration of Regular Quarterly Dividend The Board of Directors declared today a regular quarterly cash dividend of $0.23 per share on the company�s common stock, payable April 3, 2007 to shareholders of record at the close of business March 15, 2007. The company�s future dividend payments are subject to final board approval and will be based on the company�s results of operations, cash flow and prospects at the time, as well as any contractual limitations in the company�s debt instruments. No Conference Call to be Conducted The company will not be conducting a conference call to discuss its fourth quarter and full year 2006 financial results. (1) Comparisons to Prior Period Financial Results Effective January 1, 2006, the company changed its year-end to December 31 from October 31 as required by REIT regulations. All comparisons to the three months and year ended December 31, 2005 in this press release and accompanying tables refer to unaudited financial statements that have been recast to facilitate comparison to this year�s comparable periods ended December 31, 2006. Except as noted otherwise, all per share amounts referenced in this press release and accompanying tables have been restated to reflect retroactive effect of the special distribution of 14,673,663 shares of common stock on August 7, 2006 as part of a special cash-and-stock distribution to shareholders in conjunction with the company�s conversion to a REIT. In the fourth quarter of 2006, the company changed its method of reporting its business operations from three segments � Timber, Paper and Paperboard, and Converted Products � to two reporting segments � Timber and Manufacturing. All segment information for prior periods referenced in this press release and accompanying tables has been reclassified to reflect this change. About Longview Fibre Company Longview Fibre Company is a real estate investment trust (REIT) engaged in the ownership and management of 588,000 acres of softwood timberlands predominantly located in western Washington and Oregon, and manufactures specialty paper and containers through a wholly owned subsidiary. For more information, please visit Longview's Web site at www.longviewfibre.com. Forward-Looking Statements Except for historical information, the statements made in this press release are forward-looking statements made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on certain assumptions or estimates, discuss future expectations, describe future plans and strategies, contain projections of results of operations or of financial condition or state other forward-looking information. The company�s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Although the company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, actual results and performance could differ materially from those set forth in the forward-looking statements. Forward-looking statements in some cases can be identified by the use of words such as �may,� �will,� �should,� �potential,� �intend,� �expect,� �seek,� �anticipate,� �estimate,� �believe,� �could,� �would,� �project,� �predict,� �continue,� �plan,� �propose� or other similar words or expressions. Forward-looking statements are based on the company�s estimates and projections on the date they are made, and are subject to a variety of risks and uncertainties. Actual events, circumstances or results could differ materially from those anticipated by the company or reflected in the forward-looking statements due to a variety of factors, including, but not limited to: the completion of our acquisition by a third party, cash available to pay dividends, actual log harvest levels; the company�s ability to realize anticipated benefits from the sale of higher and better use lands; unanticipated changes in pricing and market conditions for its products, energy and certain raw materials, including changes in log, paper, paperboard and converted products pricing and demand; unexpected capital expenditures and the timing of completion and results of capital expenditure projects; changes in interest rates and new housing starts; For additional information about factors that could impact future results, see the risk factors in the company�s Annual Report on Form 10-K for the year ended December 31, 2006 and subsequent filings with the SEC. (Financial Tables Follow) CONSOLIDATED STATEMENTS OF INCOME (LOSS) � (Unaudited) Three Months Ended December 31 Twelve Months Ended December 31 (in thousands, except per share) � 2006� � 2005� � � 2006� (Unaudited) 2005 Net sales $ 238,491� $ 215,678� $ 950,666� $ 895,847� Cost of products sold, including outward freight � 211,537� � 190,395� � 800,997� � 746,169� Gross profit 26,954� 25,283� 149,669� 149,678� Selling, administrative and general expenses 22,839� 27,623� 96,391� 96,975� Loss (gain) on impairment and disposition of assets (3,343) 8,717� 7,229� 9,409� Advisory fees and REIT-related expenses � 1,265� � �� � 13,940� � �� Operating profit (loss) 6,193� (11,057) 32,109� 43,294� Interest income 228� 179� 984� 358� Interest expense (9,942) (9,347) (36,394) (37,133) Other income (expense) � 484� � (5,017) � (12,946) � (4,261) Income (loss) before income taxes � (3,037) � (25,242) � (16,247) � 2,258� Provision (benefit) for income taxes � (6,151) � (9,216) � (35,222) � 984� Net income (loss) $ 3,114� $ (16,026) $ 18,975� $ 1,274� Net income (loss) per share $ 0.05� $ (0.24) $ 0.29� $ 0.02� Average shares outstanding � 65,759� � 65,750� � � 65,752� � 65,750� SEGMENT AND OTHER INFORMATION (Unaudited) Three Months Ended December 31 Twelve Months Ended December 31 (dollars in thousands) � 2006� � 2005� % Change� � 2006� (Unaudited) 2005 % Change� Net sales: Timber $ 51,242� $ 40,866� 25.4� $ 193,021� $ 187,595� 2.9� Manufacturing � 187,249� � 174,812� 7.1� � 757,645� � 708,252� 7.0� Total net sales $ 238,491� $ 215,678� 10.6� $ 950,666� $ 895,847� 6.1� Operating profit (loss): Timber $ 26,791� $ 18,171� 47.4� $ 78,595� $ 86,469� (9.1) Manufacturing � (20,598) � (29,228) 29.5� � (46,486) � (43,175) (7.6) Total operating profit (loss) $ 6,193� $ (11,057) �� $ 32,109� $ 43,294� (25.9) Sales: Logs, thousands of board feet 82,191� 57,976� 41.8� 279,002� 269,645� 3.5� Lumber, thousands of board feet 16,116� 14,712� 9.5� 65,134� 67,647� (3.7) Paper, tons 85,402� 75,049� 13.8� 344,382� 315,210� 9.3� Paperboard, tons 16,616� 44,241� (62.4) 117,322� 174,426� (32.7) Converted products, tons 138,088� 139,446� (1.0) 548,128� 545,299� 0.5� Logs, $/thousand board feet $ 564� $ 611� (7.7) $ 610� $ 603� 1.2� Lumber, $/thousand board feet 301� 371� (18.9) 351� 371� (5.4) Paper, $/ton FOB mill equivalent 597� 581� 2.8� 603� 587� 2.7� Paperboard, $/ton FOB mill equivalent 434� 334� 29.9� 396� 339� 16.8� Converted products, $/ton � 902� � 805� 12.0� � 882� � 819� 7.7� Consolidated Balance Sheets December 31 (dollars in thousands) � 2006� 2005� ASSETS Current assets: Cash $ 2,753� $ 1,608� Accounts and notes receivable 122,194� 111,514� Allowance for doubtful accounts (755) (1,000) Refundable income taxes 319� 3,898� Inventories 75,785� 65,727� Prepaid expenses and other assets � 11,934� 9,295� Total current assets � 212,230� 191,042� Capital assets: Buildings, machinery and equipment at cost 1,757,092� 1,815,044� Accumulated depreciation � (1,196,042) (1,186,618) Costs to be depreciated in future years 561,050� 628,426� Plant sites at cost � 3,335� 3,549� � 564,385� 631,975� Timber at cost less depletion 202,953� 198,462� Roads at cost less amortization 8,613� 8,967� Timberlands at cost � 25,213� 24,807� � 236,779� 232,236� Total capital assets � 801,164� 864,211� Pension and other noncurrent assets � 123,724� 155,010� Total assets $ 1,137,118� $ 1,210,263� � LIABILITIES AND SHAREHOLDERS' EQUITY � Current liabilities: Payable to bank resulting from checks in transit $ 827� $ 5,115� Trade accounts payable 52,648� 48,414� Dividends payable 15,125� �� Advisory fees and REIT-related expenses payable 3,443� 1,063� Short term borrowings 6,000� �� Accrued payroll liabilities 17,938� 15,940� Other taxes payable 6,779� 6,782� Other accrued liabilities 14,461� 17,587� Current portion of long-term debt � 2,987� � �� Total current liabilities � 120,208� � 94,901� Long-term debt � 510,202� � 428,918� Deferred tax liabilities � net � 158,407� � 205,698� Postretirement and other liabilities � 47,241� � 36,677� Total liabilities � 836,058� � 766,194� Shareholders' equity: Preferred stock �� �� Common stock 98,639� 76,615� Additional paid-in capital 289,577� 3,306� Retained earnings (deficit) (60,345) 364,148� Accumulated other comprehensive loss � (26,811) � �� Total shareholders' equity � 301,060� � 444,069� Total liabilities and shareholders� equity $ 1,137,118� $ 1,210,263� CONSOLIDATED STATEMENTS OF CASH FLOWS � (Unaudited) Three Months Ended December 31 Twelve Months Ended December 31 (dollars in thousands) � 2006� � 2005� � 2006� (Unaudited) 2005 Cash provided by (used for) operations: Net income (loss) $ 3,114� $ (16,026) $ 18,975� $ 1,274� Adjustments to income (loss) not requiring (providing) cash: Depreciation 17,050� 18,261� 70,696� 72,086� Depletion and amortization 2,566� 1,862� 9,964� 10,049� Deferred tax liabilities � net (6,102) (6,598) (35,218) (598) Loss (gain) on impairment and disposition of assets (3,343) 8,717� 7,229� 9,409� Loss (gain) on extinguishment of debt �� 1,013� (742) 1,013� Change in: Accounts and notes receivable � net (884) (4,156) (10,925) (4,231) Refundable income taxes (81) (3,898) 3,579� (3,898) Inventories (3,056) 13,056� (10,058) 11,896� Prepaid expenses and other assets (579) (418) 7� (614) Pension and other noncurrent assets 2,513� (1,658) 4,503� (4,438) Trade accounts payable, payroll and other taxes payable, and other accrued liabilities 2,186� 3,877� 3,956� 2,743� Advisory fees and REIT-related expenses payable (5,399) �� 2,380� �� Federal income taxes payable �� (2,700) �� �� Postretirement and other liabilities � 983� � 129� � 1,597� � (314) Cash provided by operations � 8,968� � 11,461� � 65,943� � 94,377� Cash provided by (used for) investing: Additions to: Plant and equipment (5,261) (6,027) (22,245) (30,113) Timber and timberlands (236) (3,222) (14,762) (11,413) Proceeds from sale of capital assets � 7,520� � (123) � 11,312� � 2,011� Cash provided by (used for) investing � 2,023� � (9,372) � (25,695) � (39,515) Cash provided by (used for) financing: Additions to long-term debt �� 200,048� 314,086� 200,192� Reduction in long-term debt (1,311) (129,500) (230,311) (129,500) Short-term borrowings, net 2,300� (66,000) 6,000� (117,000) Debt issue costs �� (3,959) (4,542) (3,959) Payable to bank resulting from checks in transit 827� (2,004) (4,288) (1,166) Cash dividends paid: Regular dividends (15,122) (1,021) (43,214) (4,086) REIT E&P Dividend Distribution �� �� (77,012) �� Proceeds from sale of common stock � 178� � �� � 178� � �� Cash used for financing � (13,128) � (2,436) � (39,103) � (55,519) Change in cash position (2,137) (347) 1,145� (657) Cash position, beginning of period 4,890� 1,955� 1,608� 2,265� Cash position, end of period $ 2,753� $ 1,608� � $ 2,753� $ 1,608�